Friday, September 30, 2011

Easily Anonymous Bitcoins

There have been some healthy reminders recently that Bitcoin isn't anonymous out of the box.  I've gotten the impression that sentiment has swung the other direction toward thinking that Bitcoin anonymity is very difficult to attain.  As xkcd humorously reminds us, we should think about security and anonymity practically.  If you buy marijuana with Bitcoin and your neighbors can smell the evidence every Friday night, Bitcoin's anonymity isn't your problem.  It's fairly easy to anonymize Bitcoin enough that it's not the weak link.

  • install Tor and use it for all subsequent browsing steps
  • visit Instawallet to anonymously create a Bitcoin wallet
  • List $100 cash for sale on Silk Road Market
  • Mail the cash through any US Postal Service drop box
  • When the Silk Road bitcoin payment arrives, withdraw it to your Instawallet
You can now spend Bitcoins from this Instawallet with complete anonymity.  Instawallet doesn't know who you are (because of Tor).  Silk Road doesn't know who you are (because of Tor).  The USPS doesn't know who you are (anonymous drop boxes).  The person who sold you Bitcoins doesn't know who you are (anonymous US mail).

Slightly more complicated: buy a Bitcoin mining rig and connect to a mining pool through Tor.  Newly mined coins are completely anonymous.  You can send them to your Instawallet or to a Bitcoin client running behind Tor.

There are hundreds of variations on these techniques, but the results are the same.  High power forensics and digital surveillance might be able to pierce the anonymity veil.  At that point, your attacker is probably motivated enough that Bitcoin anonymity is the least of your worries.

5 comments:

Stephen Gornick said...

Oh, so Silk Road is used for trading bitcoins for cash as well? Interesting.

The ability to use physical bitcoins from BitBills and Casascius are adding to the mix as well.

Erik Voorhees said...

Thank you!!! Bitcoins are damn anonymous, if you take some basic precautions. They just aren't "automatically anonymous."

Anonymity is only as good as the weakest link in the chain. With a few precautions, Bitcoin is far from the weakest link and offers unmatched anonymity in online transactions.

Jon Matonis said...

Yes, bitcoin offers user-defined anonymity.

Anon8eqYgYLU said...

Why anonymity is important to me http://bitmunchies.com/index.php?cPath=58_59 it is perfectly legal but at the store you need to ask for assistance to open the cabinet and I won't.

Julian Tosh said...

It's important to keep a wallet for each identity you have to maintain your anonymity... Otherwise, the change made to you under one address/identity can leak into other transactions. Read more about it at http://bitcoinintro.com/anonymous-bitcoin/